Hedge fund IKOS Asset Management is on the defensive, calling its alleged spying against former employees "legitimate investigative efforts."

The press release follows press reports that a former IKOS fund manager, Tobin Gover, had sued IKOS co-founder Elena Ambrosiadou for hiring a Dutch spy to investigate him in 2008, and won a "substantial" judgment against her. But the release doesn't mention Gover and shows clearly that IKOS is focused squarely on co-founder Martin Coward. Ambrosiadou's husband.

Ambrosiadou has filed for divorce from Coward and has won an extraordinary legal gag order against him. But that's not the end of the story, according to IKOS.

"After discovering the theft of IKOS confidential information, software and trade secrets, the firm initiated investigations and subsequent civil actions against a number of former employees, including Martin Coward," who no longer has any stake in the US$2 billion firm, IKOS said. "Criminal investigations are being pursued by the authorities in Cyprus," where IKOS is based, "and Monaco," where Coward is believed to be living.

According to IKOS, "over a number of years, Martin Coward and his acolytes"—Gover was part of Coward's team at IKOS—"conspired to take control of the company and misappropriate its technology." When that failed, "in conflict of interest and in breach of fiduciary duty," Coward "started recruiting internally, working against the company, seeking to undermine investor confidence" and took "active steps to set up a rival hedge fund," IKOS claims. Those plans included the "unauthorized copying of [IKOS] software by a number of former staff," allegations which are now in the hands of the authorities in Cyprus and Monaco.

IKOS also takes a shot at the "avalanche of indiscriminate litigation initiated by Martin Coward… regardless of expense of consequence."

"Martin Coward uses the court process to generate damaging publicity to IKOS," the hedge fund said. "IKOS will not tolerate such conduct and injunctions have been obtained to protect the interests of investors."

Coward's spokesman offered a somewhat bemused statement to Bloomberg, saying he "strongly denies the alleged wrongdoing" and that the vitriolic press release "gives an account of the dispute between [IKOS and Coward] that Dr. Coward does not recognize."